AstraZeneca invests to expand capacity

Astrazeneca Pharma India Ltd. | Pharmaceuticals & Drugs | Healthcare | BSE: 506820 | NSE: ASTRAZEN

26 Mar 2010 Evaluate

Drug maker AstraZeneca Pharma India Ltd (APIL) board has approved to invest Rs 70 crore to expand tablet manufacturing capacity. Ordinarily, the size of the investment would warrant little attention. But it becomes significant for a few reasons.

Emerging markets are expected to contribute around 70% of the drugs market growth between 2009 and 2014. AstraZeneca Plc strategy is to grow its presence in the so-called Brazil, Russia, India, China, Mexico and Turkey markets, grow its involvement in smaller but high-growth markets and include branded generics in its portfolio. The expansion seems to part of APIL’s growth plans in India, riding on the back of an aggressive push by its parent AstraZeneca Plc into emerging markets.

AstraZeneca’s presence in India is relatively small, with APIL’s sales at Rs 385 crore in 2009, up by 13.5% over the previous year. But there is potential for growth, given the size of population and economic growth. AstraZeneca Plc believes profitability in developing nations can be quite attractive. Just four of its top 10 brands in emerging markets are present in India, much lower than other countries. APIL will launch all global mega brands in India; however it has not specified the dates. It will invest significantly in the short term to support these plans. It has been expanding its sales force, too.

This and its capital expenditure plans, too, will put some pressure on its near term profitability. Eventually, as its product pipeline ramps up, both sales and profit growth will rise at a much faster rate, resulting in a better financial performance.

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